So did our tax laws. The reality is that it is now far easier for a multinational company to arrange its affairs to avoid taxes, and I'm sure they'd find similar ways around capital export controls also.

So did our tax laws. The reality is that it is now far easier for a multinational company to arrange its affairs to avoid taxes, and I'm sure they'd find similar ways around capital export controls also.

(Original post by SummitOfReason)
Do you know how much promoting growth in our economy can do to pay off the nation's debt? I don't know much about economics but it seems to me it wouldnt be anywhere near enough anyway.

An economy growing at a healthy rate generates good tax receipts because people are spending more and earning more, these tax receipts improve the public finances.

As an example, in 1993 there was a budget deficit of 7.7%, which means the gap between government spending and government income was 7.7% of the size of the UK economy (measured in GDP). This is about the same as it is now: 7.8% according to the Budget. By 1999 this had become a budget surplus of 0.1% (ie government income was higher than government spending) and by 2001 the budget surplus was 3.9%. There was no austerity measures going on at this time, the public finances just got better because we had a growing economy. The growth rate of GDP was around 3 to 4% over these years, so tax receipts were growing faster than public spending.

Over the last few years the economy has stalled, it is barely growing at all now, struggling to make 1% a year. At these very slow growth rates it is difficult to generate the tax receipts necessary to improve the budget balance.

(Original post by MagicNMedicine)
An economy growing at a healthy rate generates good tax receipts because people are spending more and earning more, these tax receipts improve the public finances.

As an example, in 1993 there was a budget deficit of 7.7%, which means the gap between government spending and government income was 7.7% of the size of the UK economy (measured in GDP). This is about the same as it is now: 7.8% according to the Budget. By 1999 this had become a budget surplus of 0.1% (ie government income was higher than government spending) and by 2001 the budget surplus was 3.9%. There was no austerity measures going on at this time, the public finances just got better because we had a growing economy. The growth rate of GDP was around 3 to 4% over these years, so tax receipts were growing faster than public spending.

Over the last few years the economy has stalled, it is barely growing at all now, struggling to make 1% a year. At these very slow growth rates it is difficult to generate the tax receipts necessary to improve the budget balance.

Not too sure about all the detail on Clinton but I know a bit about Clarke's budgets. He came in as Chancellor in May 1993 with that deficit around the same level as it is today (7.7%). His plan was to eliminate the deficit by the end of the 1990s, which was achieved, by the time Clarke left in June 1997 it was down to (3.7%), and it went into surplus in 1999 under Brown.

Clarke had a bit of a wheeling and dealing approach to his Budgets, he was good at keeping the purse strings tight and putting some good measures in that people noticed and felt good about whilst putting in a lot of small revenue raisers that brought in extra cash.

He cut the basic rate of income tax from 25% to 23%, increased pensions above inflation (which hadn't been done since the 1970s), some increases in benefits and cold weather payments and some small increases in funding for schools, hospitals and police.

To raise revenue he used indirect taxes, on alcohol, cigs, environmental taxes like landfill tax, hence Labour's attack "twenty-two-Tory-tax rises". Brown followed this as Chancellor too, using a lot of small hard to notice tax rises to balance cuts in income tax, (the Torys attacked him for "stealth taxes").

Also to balance out the increases in education, health spending he cut spending on local government, housing, road building etc. It was a bit like today with certain departments being 'ring fenced' and protected from cuts so others have deeper cuts, except the ring fenced ones got increases under Clarke.

Clarke's budgets didn't massively excite anyone, but he did deal with a high budget deficit calmly and without large scale austerity. Unlike Osborne he didn't make a big deal about the deficit, which was as bad when he took over as it is now, and we had higher levels of unemployment too (it was 10.4% when Clarke became Chancellor, compared to 7.8% today).

However there were two differences between then and now. One the external economic environment was better: our major export markets were growing at the time and after the pound fell out of the ERM in 1992 we gained good ground with exports, in fact by 1997 we almost had a trade surplus. Exports gave us a good avenue for growth. The UK was growing probably above its capacity during Clarke's time as Chancellor which normally would have caused the economy to overheat and inflation would have spiked up but this was also the time when China and East Asia were getting going starting to supply cheap consumer goods to the West so the availability of low price goods pulled the sting out of our inflation.

The other difference was the political environment was different. Although the deficit then was the same level as it is today, there was no political capital to be made out of talking of national catastrophe, because there had been a Conservative government for 14 years anyway. Osborne is talking down the economy to try and get a political advantage by saying Labour has ruined everything so its not his fault if his policies don't work. When you are trying to increase consumer and business confidence it does not help if the Chancellor is constantly giving a negative message. Clarke didn't do that in the 1990s, 99% of the population had never heard of "the deficit".

The irony for Major's government is of those 18 years of Conservative office, the last 4, when Clarke was Chancellor, were the 4 where there were the biggest improvements in the economy, low inflation for the first time in decades, unemployment was falling, the economy was growing, the deficit was coming down. But all through those 4 years the Tories were miles behind on the opinion polls and especially when Blair came in it was just a march to victory. The economy wasn't a big part of the political landscape back then, it was all about Tory MPs rebelling against Major, or being caught up in personal scandals, so it just created the impression of a discredited government.

(Original post by Kibalchich)
Yes, I'm a socialist. So why the hell would I vote Labour?

My views are generally right wing, and you disagree with me all the time, so the conservatives are a no no. The liberals; well, you'd have to be crazy to vote for them. UKIP is far too right wing, which only leaves Labour of the four 'major' parties.

(Original post by uktotalgamer)
My views are generally right wing, and you disagree with me all the time, so the conservatives are a no no. The liberals; well, you'd have to be crazy to vote for them. UKIP is far too right wing, which only leaves Labour of the four 'major' parties.

(Original post by MagicNMedicine)
An economy growing at a healthy rate generates good tax receipts because people are spending more and earning more, these tax receipts improve the public finances.

As an example, in 1993 there was a budget deficit of 7.7%, which means the gap between government spending and government income was 7.7% of the size of the UK economy (measured in GDP). This is about the same as it is now: 7.8% according to the Budget. By 1999 this had become a budget surplus of 0.1% (ie government income was higher than government spending) and by 2001 the budget surplus was 3.9%. There was no austerity measures going on at this time, the public finances just got better because we had a growing economy. The growth rate of GDP was around 3 to 4% over these years, so tax receipts were growing faster than public spending.

Over the last few years the economy has stalled, it is barely growing at all now, struggling to make 1% a year. At these very slow growth rates it is difficult to generate the tax receipts necessary to improve the budget balance.

Interesting figures, thanks.

That's an awful deficit in the mid-90s, on the back of a much less sever economic crisis than now.

There is some real ridiculousness and incredulity to the budget as a whole. I actually believe that if you ignore it all then let things find their level. Party for five years and come back to the news and nothing will have changed much. Try it.